Singapore Budget 2022: 3 Key Changes to CPF You Need To Know

Singapore Budget 2022: 3 Key Changes to CPF You Need To Know
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Last Updated on by Tree of Wealth

The Singapore Budget 2022 is an annual budget that is developed by the government after analysing the country’s needs.

From the rise in CPF contribution rates to increase in monthly Basic Retirement Sum (BRS) payouts, the Singapore Budget 2022 was unveiled last month by the Minister of Finance Lawrence Wong, with many changes that will impact our lives. Here’s a quick rundown of what you need to know about the changes to the Central Provident Fund (CPF).

Budget 2022 – Key Changes in the CPF

1. Rise in CPF Contribution Rates

As a working Singaporean citizen, you’ll be familiar with how our CPF works. Every month, a portion of our pay will go into our CPF accounts to set aside savings for our housing, medical, and retirement needs. This amount is contributed by both the employee and the employer.

For those who are wondering how the current CPF contribution rate is in 2022, take a look at the table below.

 

 

Employee’s Age

Contribution Rate (%) for Monthly Wages ≥$750
Employer’s contribution

(% of wage)

Employee’s Contribution

(% of wage)

Total

(% of wage)

55 and below

17% 20% 37%
56 to 60 14% 14%

28%

61 to 65 10% →

11% (from 2023)

8.5% →

9.5% (from 2023)

18.5% →

20.5% (from 2023)

66 to 70

8% 6% 14%
Above 70 7.5% 5%

12.5%

From 2023 onwards, workers aged 61 to 65 and their employers will have to contribute an additional 1 per cent more. This adds up to a total contribution of 20.5 per cent of their wages, up from 18.5 per cent now.

This means that there will be less take-home pay for those turning 61 to 65 in 2023. However, in the long-term, there will be more savings inside their CPF accounts for them to enjoy in their golden years.

For businesses, there will be a 2023 CPF Transition Offset package to alleviate the rise in business costs. This package gives out payouts equivalent to half of the increased contribution rates. For example, a business making a $595 CPF contribution for a worker whose salary is $3,500 will receive $100 per month as offset payout for the whole year.

Businesses must be aware that operating costs will still rise as they have to make more contributions, though the CPF Transition Offset will help to ease the pressure a little.

 2. Increase in the CPF Basic Retirement Sum (BRS) Amount

The BRS provides CPF members aged 65 years old onwards with monthly payouts to cover their living expenses in their retirement.

The CPF BRS will rise by 3.5 per cent every year for the next five cohorts turning 55 from 2023 to 2027.

Year that member turns 55 years old

Basic Retirement Sum (BRS) Full Retirement Sum (FRS) Enhanced Retirement Sum (ERS)

2022

$96,000 $192,000

$288,000

2023 $99,400 (+3.5%) $198,800(+3.5%)

$298,200(+3.5%)

2024

$102,900 (+3.5%) $205,800(+3.5%) $308,700(+3.5%)

2025

$106,500(+3.5%) $213,000(+3.5%) $319,500(+3.5%)
2026 $110,200(+3.5%) $220,400(+3.5%)

$330,600(+3.5%)

2027 $114,100(+3.5%) $228,200(+3.5%)

$342,300(+3.5%)

Currently, the BRS for those turning 55 this year is $96,000. With the 3.5 per cent increase, the BRS will be $99,400 in 2023 up to $114,100 in 2027. This helps the members to hedge against long-term inflation and improve their standard of living.

However, for self-employed individuals who may not provide regular contributions to their own CPF accounts, this can mean a higher benchmark that they need to aim for to reach the BRS.

3. Increase in Estimated BRS Monthly Payouts

With the higher BRS from 2023 to 2027, the payouts will be increased to $1,000 (up from $850) under the CPF LIFE Standard Plan. More money is available for members to enjoy from 65 years old onwards.

Conclusion

CPF forms one of the key pillars for retirement in Singapore, which explains the changes in the system to keep up with the times. With a longer life expectancy, we will need more money to fund our retirement years. Staying updated with the CPF’s changes can help us understand and better meet our retirement planning goals.

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